The proposal by the Department of Financial Services would establish a so-called "BitLicense." Merchants and consumers who use the virtual currency Bitcoin and others solely to buy and sell goods and services wouldn't need a license.

However, those buying and selling virtual currency as a customer business would.

The proposal, following a year-long department study, is intended to establish consumer protections and prevent money laundering.

Financial Services Superintendent Ben Lawsky says his agency is trying to do that without stifling innovation.

The proposed rules will be published next week, followed by a 45-day comment period.